What if you could grow your real estate portfolio by taking the cash (often, somebody else's cash) you utilized to buy one home and recycling it into another residential or commercial property, end over end as long as you like?

That's the premise of the BRRRR real estate investing method.
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It enables investors to buy more than one residential or commercial property with the very same funds (whereas traditional investing needs fresh money at every closing, and therefore takes longer to obtain residential or commercial properties).

So how does the BRRRR method work? What are its advantages and disadvantages? How do you do it? And what things should you consider before BRRRR-ing a residential or commercial property?

That's what we'll cover in this guide.

BRRRR stands for buy, rehab, rent, re-finance, and repeat. The BRRRR approach is acquiring appeal since it allows investors to use the same funds to buy multiple residential or commercial properties and hence grow their portfolio quicker than conventional realty financial investment approaches.

To start, the real estate investor finds a bargain and pays a max of 75% of its ARV in money for the residential or commercial property. Most loan providers will just loan 75% of the ARV of the residential or commercial property, so this is important for the refinancing phase.

( You can either utilize money, difficult cash, or personal cash to purchase the residential or commercial property)

Then the financier rehabs the residential or commercial property and leas it out to renters to create constant cash-flow.

Finally, the investor does what's called a cash-out refinance on the residential or commercial property. This is when a banks offers a loan on a residential or commercial property that the financier already owns and returns the money that they used to the residential or commercial property in the very first place.

Since the residential or commercial property is cash-flowing, the financier is able to spend for this new mortgage, take the money from the cash-out re-finance, and reinvest it into new systems.

Theoretically, the BRRRR process can continue for as long as the financier continues to buy smart and keep residential or commercial properties inhabited.

Here's a video from Ryan Dossey describing the BRRRR procedure for beginners.

An Example of the BRRRR Method

To comprehend how the BRRRR process works, it might be practical to stroll through a quick example.

Imagine that you discover a residential or commercial property with an ARV of $200,000.

You expect that repair costs will be about $30,000 and holding costs (taxes, insurance coverage, marketing while the residential or commercial property is vacant) will have to do with $5,000.

Following the 75% guideline, you do the following math ...

($ 200,000 x. 75) - $35,000 = $115,000

You offer the sellers $115,000 (limit offer) and they accept. You then discover a difficult money lending institution to loan you $150,000 ($ 35,000 + $115,000) and offer them a deposit (your own money) of $30,000.

Next, you do a cash-out refinance and the brand-new lender accepts loan you $150,000 (75% of the residential or commercial property's value). You settle the difficult money lending institution and get your down payment of $30,000 back, which permits you to repeat the procedure on a brand-new residential or commercial property.

Note: This is simply one example. It's possible, for circumstances, that you could obtain the residential or commercial property for less than 75% of ARV and wind up taking home money from the cash-out refinance. It's also possible that you might pay for all getting and rehab expenses out of your own pocket and after that recoup that money at the cash-out refinance (rather than using personal cash or hard money).

Learn How REISift Can Help You Do More Deals

The BRRRR Method, Explained Step By Step

Now we're going to walk you through the BRRRR technique one action at a time. We'll describe how you can find great deals, protected funds, compute rehab costs, attract quality tenants, do a cash-out re-finance, and repeat the entire process.

The primary step is to discover bargains and acquire them either with cash, personal cash, or hard money.

Here are a few guides we've created to assist you with finding premium deals ...

How to Find Real Estate Deals Using Your Existing Data
The Ultimate Real Estate Investor Marketing Plan: Better Data, More Deals


We also suggest going through our 2 week Auto Lead Gen Challenge - it just costs $99 and you'll learn how to produce a system that produces leads utilizing REISift.

Ultimately, you don't desire to buy for more than 75% of the residential or commercial property's ARV. And ideally, you want to acquire for less than that (this will result in money after the cash-out re-finance).

If you want to discover private cash to buy the residential or commercial property, then attempt ...

- Connecting to family and friends members
- Making the lending institution an equity partner to sweeten the offer
- Connecting with other company owner and financiers on social networks


If you desire to discover hard cash to purchase the residential or commercial property, then attempt ...

- Searching for hard money lending institutions in Google
- Asking a real estate agent who deals with investors
- Requesting for referrals to difficult cash lenders from local title business


Finally, here's a quick breakdown of how REISift can assist you find and protect more deals from your existing data ...

The next step is to rehab the residential or commercial property.

Your goal is to get the residential or commercial property to its ARV by investing as little cash as possible. You absolutely don't desire to spend beyond your means on repairing the home, spending for extra home appliances and updates that the home does not require in order to be valuable.

That doesn't suggest you ought to cut corners, however. Ensure you hire credible specialists and repair everything that needs to be repaired.

In the video below, Tyler (our founder) will show you how he approximates repair work expenses ...

When purchasing the residential or commercial property, it's finest to estimate your repair costs a bit greater than you expect - there are often unforeseen repairs that come up during the rehab phase.

Once the residential or commercial property is totally rehabbed, it's time to find tenants and get it cash-flowing.

Obviously, you desire to do this as quickly as possible so you can re-finance the home and move onto acquiring other residential or commercial properties ... but don't rush it.

Remember: the top priority is to discover excellent tenants.

We recommend using the 5 following requirements when thinking about tenants for your residential or commercial properties ...

1. Stable Employment
2. No Past Evictions
3. Good References
4. Sufficient Income
5. Good Financial History


It's better to reject an occupant because they do not fit the above criteria and lose a couple of months of cash-flow than it is to let a bad occupant in the home who's going to cause you issues down the roadway.

Here's a video from Dude Real Estate that uses some fantastic suggestions for discovering top quality occupants.

Now it's time to do a cash-out re-finance on the residential or commercial property. This will enable you to settle your difficult money lending institution (if you used one) and recover your own expenses so that you can reinvest it into an extra residential or commercial property.

This is where the rubber fulfills the roadway - if you found a bargain, rehabbed it effectively, and filled it with top quality renters, then the cash-out re-finance ought to go smoothly.

Here are the 10 best cash-out refinance loan providers of 2021 according to Nerdwallet.

You may likewise find a local bank that wants to do a cash-out refinance. But keep in mind that they'll likely be a seasoning period of at least 12 months before the loan provider wants to provide you the loan - ideally, by the time you're finished with repairs and have actually found renters, this seasoning period will be completed.

Now you duplicate the process!

If you utilized a personal cash lender, they may be prepared to do another deal with you. Or you could use another difficult money lender. Or you might reinvest your cash into a brand-new residential or commercial property.

For as long as everything goes efficiently with the BRRRR method, you'll have the ability to keep acquiring residential or commercial properties without really using your own cash.

Here are some pros and cons of the BRRRR property investing approach.

High Returns - BRRRR requires really little (or no) out-of-pocket cash, so your returns should be sky-high compared to traditional realty investments.

Scalable - Because BRRRR enables you to reinvest the exact same funds into brand-new units after each cash-out re-finance, the model is scalable and you can grow your portfolio very rapidly.

Growing Equity - With every residential or commercial property you buy, your net worth and equity grow. This continues to grow with appreciation and benefit from cash-flowing residential or commercial properties.

High-Interest Loans - If you're utilizing a hard-money lending institution to BRRRR residential or commercial properties, then you'll likely be paying a high interest rate. The goal is to rehab, lease, and refinance as quickly as possible, however you'll generally be paying the difficult cash lending institutions for at least a year or so.

Seasoning Period - Most banks require a "flavoring period" before they do a cash-out re-finance on a home, which suggests that the residential or commercial property's cash-flow is steady. This is typically at least 12 months and sometimes closer to two years.

Rehabbing - Rehabbing a residential or commercial property has its risks. You'll need to deal with contractors, mold, asbestos, structural inadequacies, and other unforeseen issues. Rehabbing isn't for the light of heart.

Appraisal Risk - Before you buy the residential or commercial property, you'll want to make sure that your ARV calculations are air-tight. There's always a danger of the appraisal not coming through like you had actually hoped when re-financing ... that's why getting an excellent deal is so darn essential.

When to BRRRR and When Not to BRRRR

When you're questioning whether you must BRRRR a specific residential or commercial property or not, there are two concerns that we 'd recommend asking yourself ...

1. Did you get an outstanding offer?
2. Are you comfortable with rehabbing the residential or commercial property?


The very first question is necessary due to the fact that a successful BRRRR deal depends upon having found a terrific offer ... otherwise you could get in trouble when you attempt to refinance.

And the second concern is very important because rehabbing a residential or commercial property is no small job. If you're not up to rehab the home, then you might consider wholesaling rather - here's our guide to wholesaling.

Want to find out more about the BRRRR technique?

Here are some of our favorite books on the subjects ...

Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Residential Or Commercial Property Investment Strategy Made Simple by David M. Greene
The Book on Estimating Rehab Costs: The Investor's Guide to Defining Your Renovation Plan, Building Your Budget, and Knowing Exactly How Much It All Costs by J Scott
How to Buy Real Estate: The Ultimate Beginner's Guide to Starting by Brandon Turner
Final Thoughts on the BRRRR Method

The BRRRR method is an excellent way to invest in real estate. It permits you to do so without utilizing your own cash and, more importantly, it allows you to recoup your capital so that you can reinvest it into brand-new systems.